Ghana could be the country that catalyzes significant economic growth in West Africa, much like Japan was the catalyst in East Asia and the United Kingdom was in Europe, writes Bloomberg Opinion columnist Noah Smith. Ghana holds a number of advantages over its neighbors, including higher literacy rates and educational attainment, a lower child mortality rate, and higher scores on international indicators of governance, ease of doing business, and corruption and freedom indexes.
These advantages resulted in a 7 percent growth rate for Ghana in 2019, one of the best in Africa. To fully realize this growth potential and transform Ghana into a regional economic power, Smith argues, the country needs to restructure its economy away from commodity exports. Nearly 85 percent of Ghana’s exports in 2018 were gems, precious metals, mineral fuels, and cocoa. Commodity exports in of themselves aren’t the problem, Smith says, as Ghana has managed to reinvest the profits into greater agricultural productivity, driving more Ghanaians to urbanize.
The problem is that Ghana’s cities aren’t built around manufacturing, but rather the service industry. Many Ghanaians take up jobs in the informal service sector, a precarious economic niche that lacks stability and makes it difficult for government to collect sufficient revenue to invest in development. Ghana is in a sense caught in a catch-22: its strong commodity-export-focused economy has done wonders for its growth, but it also raises the country’s exchange rate, which increases the price of exported manufactured goods and makes wages in the industrial sector uncompetitive.
To push past these obstacles, Smith suggests that Ghana implement subsidization programs targeted at export-oriented manufacturing. Subsidized wages for workers would allow companies to save on costs and thus ensure more stable employment for Ghanaian laborers. Providing companies with subsidized energy would make the industry more attractive to investors such as China, and a more open immigration policy would encourage skilled laborers from Nigeria and the African diaspora to relocate to Ghana, resulting in the growth of a technically advanced labor pool, which could be tapped to jump-start and grow Ghana’s manufacturing sector.